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Hargreaves: withholding tax on rollover funding under scrutiny

Speed read
In Hargreaves the FTT considered a list of concepts central to the applicability of UK withholding tax on interest payments. In finding that the interest had a ‘UK source’ the FTT gave consideration to where a practical person would consider the source to be having regard to the underlying commercial reality. Further the FTT found that the interest was ‘yearly’ as the loans had a measure of permanence and were regarded by the original lenders as an investment in the borrower’s business despite being separate as a matter of law and generally repaid on an annual basis. Whilst the FTT’s views on UK source should not surprise practitioners its focus on the subjective intentions of the parties when determining whether the interest was ‘yearly’ raises new questions and uncertainties. The availability of treaty relief and beneficial entitlement to interest payments were also considered in...

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